L.A. pension proposal would hike retirement age, cut benefits

Setting the stage for a legal battle with employee unions, the Los Angeles City Council is weighing a new plan to reel in pension costs by hiking the retirement age and cutting benefits for thousands of future civilian employees.

The proposal, unveiled the same day that the council backed a three-year business tax break worth roughly $50 million, would set the retirement age at 65 and establish new financial penalties for those who retire earlier. The plan, which could be voted on as early as next week, also would require new employees to pay more if the retirement fund suffers major investment losses.

None of the changes would apply to police officers or firefighters — or any civilian worker hired before July 1. Nevertheless, union leaders promised to fight the plan, saying city leaders lack the legal authority to impose the changes without going back to the bargaining table.

“We’ll take whatever action necessary to enforce our rights, even if it means going to court,” said Bob Schoonover, president of Service Employees International Union Local 721, who called the plan a “frontal attack on all city workers.”

Schoonover said the timing of the council’s vote sent a “poor message” to the workforce. They’re “going to cut pensions while giving business people a tax break,” he said.

City Administrative Officer Miguel Santana said the pension plan changes would save between $30 million and $70 million within five years and as much as $4.9 billion over three decades. Despite the threat of legal action, Santana claimed most employees don’t have a problem with the proposals because they affect new workers only.

“I don’t think that their membership cares, quite frankly,” he said. “This is all about people who don’t work for the city today.”

The pension plan came out an hour after the council voted 10 to 2 to extend a so-called “business tax holiday” for companies that open in Los Angeles between 2013 and 2015. The tax break, which requires a second vote next week, would allow companies to keep roughly $50 million over three years, according to city estimates. The tax holiday went into effect nearly three years ago and has resulted in an estimated $30-million reduction in potential revenue, officials said.